In January, Shopify released their annual Commerce Trends report – which parsed through stats, surveys and industry insights, to paint a picture of a business landscape in a state of rapid change. Online commerce faces some incredible challenges at the moment, but with change, also comes the opportunity for innovation and growth.
Over on the Alvio website, they spent the last month going through that report – topic by topic – to create a series of actionable guides covering the separate sections dedicated to Money, Marketing, Supply Chain, Retail and Ecommerce.
Supply Chain was one of the areas that saw the most dramatic changes. The report hinted that companies will need to entirely rethink their approach to logistics in order to keep ahead in 2023 and beyond.
The Supply Chain Issue
Commerce has always been subject to the effects of world events. War and pandemics, economic crises, terrorism or natural disasters, all take their toll on the cost of doing business, as do the steadily rising costs of fuel and power.
Many of us are feeling those strains on our businesses right now. According to the Annual Global Supply Chain Report from Interos, in 2021, disruptions to the supply chain (for example, as a result of the Covid-19 pandemic) caused businesses an average of $184 million dollars in lost revenue. We certainly felt the pinch around that time, and Shiptheory’s Rita Jenkins confirmed that it was a common picture:
“We have observed the significant impact of supply chain disruptions on the global consumer experience, both during and after the Covid-19 pandemic. These disruptions have resulted in challenges in maintaining optimal product availability and delivery performance, leading to increased cart abandonment rates and longer shipping times, resulting in lower sales.”
Rita Jenkins, Head of Partnerships, Shiptheory
We may be through the worst of the recent issues now. However, rather than dismissing these problems as a one-off, smart businesses should be learning from this episode and asking themselves how they can be better prepared against future supply chain disruptions.
A 2020 report from the McKinsey Global Institute told us that supply chain disruptions lasting a month or longer happen, on average, once every 3.7 years. The damage this can do becomes more significant all the time, as they note that since 2000: “the value of intermediate goods traded globally has tripled to more than $10 trillion annually.” As a result, they stressed the importance of fostering lean supply chain models in order to avoid, or at least minimise, such disruptions. But what exactly does a lean supply chain look like?
A chain is only as strong as its weakest link. That’s something to keep in mind when considering the structure of your business, and particularly when it comes to logistics.
A traditional supply chain model might look something like this:
Manufacturer > Brand > Distributor > Wholesaler > Retailer > Customer
However, such a model is brittle by design. More moving parts results in more potential for disruption. Whereas on the other hand, robust, automated models are able to provide more resilience for changing times. Before we look at how that could work though, let’s talk about why it’s so important to consider this right now.
The Changing Face of Logistics
In Shopify’s Commerce Trends 2023 report, they summed up their section on Supply Chains with the following three key insights:
“Consumer expectations are getting higher: Fast and free shipping is the new standard, but supply chain issues make that hard to meet.
“Brands pivot to meet consumer demands: Resilient brands are holding more inventory, diversifying product sourcing, cracking down on return rates, and leaning into digitisation.
“Adapting now could lead to stronger logistic networks: Slower and less consistent supply chains are transforming how brands think about and strengthen them in the future.”
Commerce Trends 2023 – p.15
In short, what they’re suggesting is that brands today should focus on delivering first rate service, being efficient and adaptable according to demand, and that making these changes will lead to more powerful logistics networks going forwards. We spoke to Alvio’s Mike Harding about the Shopify insights;
‘’ It has become more important than ever for brands to prioritise customer satisfaction. The consumer simply has more choices these days, so if your service doesn’t deliver then it’s very easy for them to buy elsewhere instead. I think for that reason it’s crucial that you think beyond the sale itself, and ask what added value your brand is offering. What are you doing that’s going to make customers choose you over the competition? What type of relationships are you building?” -
Mike Harding, Founder, Alvio
Businesses don’t need to be afraid of the changing expectations customers have for modern supply chains – they just need to rise to them. When competition is high, it sets the bar for us all. We need to be realistic, and to understand that consumers have more choices than they ever had before.
The Shopify report said that “Fast and free shipping is the new standard”… so there you go, that’s the new bar. You need to be proactive, and find a way to meet it. Meanwhile, those businesses which cannot keep up with the changing expectations of consumers are liable to find their customers leaving them for another company who can.
Here, Shopify spells out the fate waiting for those companies who can’t keep up:
“Nearly six out of 10 companies report lost sales from products being out of stock … Not to mention the damage to reputation and customer relationships … Consumers are tired of being patient. Brands need updated solutions to succeed in the next era of commerce.”
Commerce Trends 2023 – p.17
“Adaptability” is the key here, and in the Commerce Trends article for the Alvio website, they concluded that: “in 2023 and beyond, businesses with slow, clunky, gas-guzzling supply chains are going to have a hard time staying afloat.”
Building Future-Proof Logistics
We have highlighted some major challenges here. The big question that remains is, what strategies can your business use to solve them? Here’s how the Shopify report sums up the goal:
“Global brands need logistics practices that can adapt quickly to a continually changing ecommerce landscape and attract the buyers of tomorrow.”
Commerce Trends 2023 – p.16
Thankfully, their Commerce Trends report wasn’t all doom and gloom. It also highlighted four actionable steps that would set businesses up to thrive in the changing commerce landscape of 2023 and beyond:
● Hold more inventory
● Diversify product sources
● Shrink return rates
● Digitise supply chains
Let’s take a look at each of these in turn.
Hold More Inventory
Initially this might sound straightforward – as Shopify explains, “More available stock makes it easier to meet customer needs.” However, there is a fine balance to be maintained, because companies that go too far in this direction run the risk of overstocking, and “trapping funds in inventory they can’t sell.”
Diversify Product Sources
If you recall the traditional supply chain model we described earlier (a chain with as many as half a dozen links from the manufacturer to the end consumer), that’s what we would call a narrow and “brittle” logistics model. The solution here is to build broader and more robust models instead, which don’t always depend on single suppliers. As the Shopify report comments: “Nearly one-third of Shopify Plus merchants are building shock absorbers into their supply chains by diversifying their product sourcing.”
Shrink Return Rates
Perhaps one of the most avoidable pitfalls facing businesses in 2023 is the issue of product returns. In order to minimise these, Shopify explains, “customers need to be confident what they see online is what shows up at their door.” Transparent product listings, and first-class customer service, will therefore go a long way towards eliminating this cost on your business.
Digitise Supply Chains
According to Shopify, digitising more of your supply chain allows you to “catch disruptions as soon as, or even before, they happen.” They note the issue that “few companies have visibility into the deeper tiers of their supply networks, even though greater insight would help businesses anticipate disruptions and demand.”
The Alvio Solution
The key points from the Shopify plan for Supply Chains are as follows: have enough stock that you never miss an order; don’t be too dependent on any one supplier; communicate clearly and offer excellent customer service; and digitise your systems for maximum transparency and insight.
We believe that our approach to all-inclusive end-to-end logistics ticks all of these boxes… but we would also like to take a moment to look at what Alvio are doing themselves.
Alvio is an eCommerce partnership platform which is designed to help companies collaborate, network and grow. It allows a retailer to fill their online storefront with items from their partners’ stores, which customers can then purchase altogether in the same cart. When sales are made, orders are fulfilled from their respective warehouses. Alvio calls this a system of “moving data, not products” – and the model has been shown to reduce users’ shipping mileage by as much as 16%.
In their breakdown of the Commerce Trends 2023 report, Alvio demonstrated how this collaborative model could be employed to tackle supply chain challenges, “by putting the whole supply chain into your hands.”
As they explain: “Alvio helps you grow your presence, while shrinking your supply chain. By moving data not products, you’ll have fewer links in your chain – from production to distribution to customers – while those same products can appear in more storefronts than ever. In this way, Alvio helps grow light and nimble brands, ready to adapt to anything the future can throw at them.”
There’s no doubt about it, these are difficult times for commerce. In the last few years alone, we have seen a series of massive disruptions, which have been felt right across the industry – and continue to affect day-to-day business for many of us now.
Shopify’s Commerce Trends 2023 report highlighted a number of ways that businesses could adapt to meet these changes head-on. They explain: “Such shifts might cost more in the short term, but they create more robust supply chains that can adapt to a turbulent logistics landscape.”
With Shiptheory though, those changes don’t even need to increase your costs. We have shown above how Shiptheory’s approach to automating and digitising end-to-end logistics provides smart answers to all of the challenges raised by Shopify’s report.
As we’ve said, businesses should see these as opportunities instead:
“Merchants should take advantage of this situation to reflect on their relationship with consumers, explore innovative methods to enhance their value proposition, and embrace automation to streamline operations – don't be afraid of change.”